Gross margins of domestic apparel clearly divided last year

Guangdong is "powerhouse" of China's clothing production, but current surviving state of local garment enterprises make investors worry about performance sustainability of domestic garment enterprises.

According to the disclosure of annual reports from listed companies completed by the end of April 2010, gross margins of sales by domestic apparel clearly divided last year.

By industry classification, among 35 garment enterprises listed on A shares last year, Lucky Bird achieved the highest gross margin by as high as 54.19 percent, net profit margin was 19.29 percent, while gross margin of sales by China's wearing apparel was only 5.9 percent, net profit margin was only 1.16 percent.

Most enterprises in the annual report referred to cost pressures. In fact, cotton price continued to rise from last September to early November, soaring from 18,000 Yuan per ton to 30,000 Yuan per ton, representing an increase of about 70 percent. At the same time, labor shortage emerged in various parts, domestic labor force rose further by over 20 percent.

However, recently domestic cotton price has plummeted. At present, cotton price is only 8 Yuan / kg in domestic market, follow-up industry chain of spinning and weaving industries are at loose ends in face of the volatility in cotton price, many companies have to limit or shut down production.